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In the beginning, there was Menger. It was this book that reformulated, and really rescued, economic science. It kicked off the Marginalist Revolution, which corrected theoretical errors of the old classical school. These errors concerned value theory, and they had sewn enough confusion to make the dangerous ideology of Marxism seem more plausible than it really was.

Menger set out to elucidate the precise nature of economic value, and root economics firmly in the real-world actions of individual human beings.

For this reason, Carl Menger (1840-1921) was the founder of the Austrian School of economics. It is the book that Mises said turned him into a real economist. What's striking is how nearly a century and a half later, the book still retains its incredible power, both in its prose and its relentless logic.

The Mises Institute's new edition features a new foreword by Peter G. Klein, which summarizes Menger's contribution and places him in the history of ideas. He also explains his continued relevance.

Economics students still say that it is the best introduction to economic logic ever written. The book also deserves the status as a seminal contribution to science in general. Truly, no one can claim to be well read in economics without having mastered Menger's argument.

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Most Helpful Customer Reviews

At first glance, one could hardly imagine important of this book. Menger's Principles is a modest sized paperback, much smaller than modern Principles textbooks. However, its contents are of colossal importance. This is the book that set value theory straight in economics, and more. Menger resolved the Diamond-Water Paradox posed by Adam Smith. Menger did this by showing how exchange values in markets to derive from marginal value in use. Menger's Marginal Value theory quickly displaced the Labor Value theory of Adam Smith. Nowadays only Marxists cling to Labor Value theory. Menger also worked out a detailed theory of economic goods. He worked out the principles of pricing for final goods and factors of production- all in a way that shows the interconnectedness and complexity of these individual elements. Not only did Menger perform the invaluable service of explaining the correct theory of value, he set the stage for many further developments in economics.Menger looks at everything in terms of cause and effect. He identifies the four conditions that make any commodity an economic good. He then extrapolates out to show how the interdependence of complementary inputs in production means that their value depends both upon the existence of final goods as well as other inputs. Trade depends upon `reverse valuation' up to the point of indifference. Menger also understood how transaction costs (the economic sacrifices that exchange operations demand, p 189) limit trade.The early chapters stress two points. First, the importance of goods being compliments to each other. Second, men must possess correct foresight and knowledge concerning the means available to them for the attainment of the desired ends (p89).Read more ›

In this masterful work, Menger manages to precede works in several other disciplines. For examples, Menger's implied heirarchy of needs substantially precedes Maslow's famous theory on that topic. Menger's pre-requisites for a thing to become a good are the foundation for the bulk of modern marketing (at least, modern marketing that is of any value to consumers), and his explanation of exchange is vastly superior to the robotic theories offered by Jevons, Marshall, and the other predecessors of modern mainstream economic thought. I require all of my students to read this book, and they come away with an appreciation for Menger's complex and subtle thought (although they hate the Germanic twisting of the language!). If only I could get my colleagues to read this book....

Probably due to his study of Aristotle, Menger was meticulous in forming his economic principles from observations of reality. Thus he looked at man and his nature, and drew appropriate conclusions (much like philosopher Ayn Rand). Contrast this to the Platonist floating abstrations of modern mainstream economics.Note that Menger's principles are fundamental and therefore basic. He creates an excellent foundation and starting point for further study of economics. Unfortunately few economists have adopted his fundamental method and approach to economics (even the Austrians veered away). Yet this is the most promising path an economist could take.One example of the way Menger can spur a re-checking of premises: Menger disputed Adam Smith's assertion that division of labor was the fundamental cause of human economic progress- Menger announced that the most fundamental cause of human economic progress was a growing knowledge of the causal connections required to make goods, combined with the ability to act on that knowledge. A fantastic observation.

In his Principles, Menger states clearly that the conditions for something to be a good are (reinterpreted by myself):1-There must be a neccesity(or, more propely, a desire of any kind to be satisfied). 2- The thing must serve to satisfy that neccesity(or, again, the individual must at least believe that it does so) and 3.- The individual must be aware of the relationship between his need and the thing which is able to satisfy it. When such conditions get together in a scarce thing, we speak of an economic good, to which the individual assigns subjective value depending on the degree of satisfaction of a particular need that a unit of the good provides. There is no such a thing as an objective value, and this basic idea hasn't been perceived by many still in the 20th century. May Menger's book serve as a remedy to those misleading( and source of so many mistakes)interpretations.

The reader from Michigan must have read a different version of this book than I just read. Menger CLEARLY shows that all value is subjective (including that non-sensical theory of labor value put forth by Marx and his adherents). He shows that NOTHING is of any material value to an INDIVIDUAL until an INDIVIDUAL decides that some product or service (i.e., labor) has a use value or exchange value for himself. It is understandable how this book became the starting point for all of the Austrian School of Economics economists who followed Menger. He laid the foundation upon which the towering edifices of Ludwig Von Mises and Murray Rothbard were built. Absolutely a must read for anybody who wants to understand real basic economic thought, not the Keynesian garbage that has polluted our universities for most of this century.